Japan embraces fintech’s hard-boiled wonderland
Banks and politicians in Japan are getting ever more energetic for fintech with grand plans for APIs, artificial intelligence (AI), digital currencies, blockchain, funding for start-ups and an easing of regulations.
According to the Nikkei Asian Review, the Bank of Tokyo-Mitsubishi UFJ (BTMU) will launch a website on Monday (25 September) for makers of smartphone apps and similar digital services. The plan is to bring in potential partner businesses “before it starts offering such developers methods to access client accounts – such as for making transfers or checking transaction details – via an API”. Just another example of a big bank looking to work with fintech firms.
Starting in late September, Nikkei Asian Review says Mizuho Financial Group and Softbank will offer the country’s first AI-driven loan service for individuals. “The AI, using information such as applicants’ bill payment records to calculate their credibility, can offer loans in as little as 30 minutes.”
As the interest in digital currency grows stronger, Japanese banks are also jumping on the bandwagon. There are plans to establish a digital currency by 2020, which may be called J Coin (but no name is confirmed yet), with which users can shop and exchange money via smartphone.
Sumitomo Mitsui Financial Group (SMFG) will form a joint venture with Yahoo Japan to analyse the bank’s client data. Yahoo’s tech will be used to work out “latent needs for financing products, using indicators such as deposit balances”.
This month, Nomura Holdings opened a $100 million fund for investing in US start-ups. Back in April, it launched its “Voyager – Nomura Fintech Partnership” – including a new JPY 10 billion ($91.7 million) fund to provide support to start-ups in India.
While all that activity is impressive, SBI Holdings has been up to something as well. It recently became the principal stakeholder in enterprise software firm R3; and partnered with Thailand’s Siam Commercial Bank on a blockchain-based payment service. So SBI’s interest in blockchain is loud and clear.
Along with these healthy ambitions in Japan, its Prime Minister Shinzo Abe has been making some positive sounds for the industry.
On Wednesday (20 September) at the New York Stock Exchange (NYSE), Abe said the government will roll back regulations on some start-ups to improve innovation.
“When one wants to conduct a world-first trial, such as with new financial services made possible through fintech, it is impossible to predict the sort of regulations with which the trial will come into conflict,” Abe said.
In terms of sandboxes, Japan is a bit late to the show as these have sprung up in quite a few countries. But in his NYSE chat, Abe said the country is also pushing for a regtech sandbox programme.
“We will make a sandbox in which it is possible for certain participants to conduct trial and error freely on new business for a certain period of time without conforming to existing regulations,” he said.
If you like history, you may be aware of “sakoku” in Japan. Let the Encyclopaedia Britannica explain: “The 1630s marked an important dividing line in foreign relations with the issuance of a series of directives enforcing a policy of national seclusion, later called sakoku (literally, ‘closed country’).”
No one is saying Japan is in that isolated state, but some people are calling for the country to wake up more to global fintech.
Michael Harte, Barclays’ head of group innovation, told the Nikkei Asian Review, if Tokyo wants to be a global centre of finance, its start-ups need to “design for global use”. He is not alone in his views.
“Very few Japanese fintech firms are known overseas for their service or technology,” says Nobuyuki Hirano, chief executive of Mitsubishi UFJ Financial Group (MUFG) and chairman of the Japanese Bankers Association.
According to a review of global fintech hubs released by Deloitte in April, Tokyo trails Singapore, Hong Kong and Sydney in the Asia Pacific region.
The value of deals came to $87 million in Japan last year, less than 1% of the global total of $17.4 billion. About 80% of the deals took place in China and the US.
But as with Abe’s good words for our sector, Nikkei Asian Review adds that Tokyo’s governor Yuriko Koike has “spoken enthusiastically of building the city’s financial hub around the fintech industry”. We’ll see what comes of those words.
At Banking Technology we have wrote quite a lot of stories about Japan and that has recently increased. With all these banks and politicians waking up to fintech’s charm (and money), we may well see a lot more in the future.